CIH: Late July margins mixed

CIH: Late July margins mixed

Dairy producer margins were mixed over the last two weeks of July, improving in nearby 2013 Q3 and Q4, while deteriorating slightly in Q1 and Q2 of 2014, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. Dairy margins still remain strong from a historical perspective, above the 80th percentile through the last half of 2013, while between the 70th and 80th percentiles through the first half of 2014.

While milk prices were steady to higher in nearby periods supported by strong product prices and demand, deferred contracts dropped sharply over the past two weeks, with an improved outlook for new-crop feed availability and lower prices suggesting higher milk production later this year into 2014. It seems that dairy producers may agree as slaughter rates have begun to decline.

June dairy cow slaughter was 8.3% lower than May on a daily average basis, and down 3.9% from 2012. In contrast, dairy cow slaughter through the first half of the year was up 3.4% from 2012.